October 26, 2011

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The Catholic Church has for many years raised objections to the patterns of globalization, concentration of wealth and economic equality that have encouraged the massive redistribution of wealth upward that has made the rich richer, the poor poorer and the middle class more vulnerable than at any time in generations.

And, now, as the Occupy Wall Street movement raises the issue of economic inequality, the church is stepping up with a proposal to begin to address the extreme injustice of a system that taxes working people for necessities but allows speculators to avoid even the most basic responsibilities.

On the eve of the G-20 leaders, the Pontifical Council for Justice and Peace has endorsed a series of reforms to the global economic financial and monetary systems that features as its centerpiece the development of a financial transactions tax.

Specific attention should be paid to the reform of the international monetary system and, in particular, the commitment to create some form of global monetary management, something that is already implicit in the Statutes of the International Monetary Fund. It is obvious that to some extent this is equivalent to putting the existing exchange systems up for discussion in order to find effective means of coordination and supervision. This process must also involve the emerging and developing countries in defining the stages of a gradual adaptation of the existing instruments.In fact, one can see an emerging requirement for a body that will carry out the functions of a kind of “central world bank” that regulates the flow and system of monetary exchanges similar to the national central banks. The underlying logic of peace, coordination and common vision which led to the Bretton Woods Agreements needs to be dusted off in order to provide adequate answers to the current questions. On the regional level, this process could begin by strengthening the existing institutions, such as the European Central Bank. However, this would require not only a reflection on the economic and financial level, but also and first of all on the political level, so as to create the set of public institutions that will guarantee the unity and consistency of the common decisions.

These measures ought to be conceived of as some of the first steps in view of a public Authority with universal jurisdiction; as a first stage in a longer effort by the global community to steer its institutions towards achieving the common good. Other stages will have to follow in which the dynamics familiar to us may become more marked, but they may also be accompanied by changes which would be useless to try to predict today. In this process, the primacy of the spiritual and of ethics needs to be restored and, with them, the primacy of politics—which is responsible for the common good—over the economy and finance. These latter need to be brought back within the boundaries of their real vocation and function, including their social function, in consideration of their obvious responsibilities to society, in order to nourish markets and financial institutions which are really at the service of the person, which are capable of responding to the needs of the common good and universal brotherhood, and which transcend all forms of economist stagnation and performative mercantilism.

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On the basis of this sort of ethical approach, it seems advisable to reflect, for example, on: a) taxation measures on financial transactions through fair but modulated rates with charges proportionate to the complexity of the operations, especially those made on the “secondary” market. Such taxation would be very useful in promoting global development and sustainability according to the principles of social justice and solidarity. It could also contribute to the creation of a world reserve fund to support the economies of the countries hit by crisis as well as the recovery of their monetary and financial system…

The G-20 gathering in Cannes November 3 and 4 is expected to discuss a financial speculation tax, with strong encouragement from French President Nicolas Sarkozy and German Chancellor Angela Merkel—who says, “We must ensure that financial market actors share in the costs of fighting the crisis. I will push for this until it happens, at least in Europe, even better worldwide.

Sarkozy and Merkel have work to do; there is opposition within the G-20 even to an exceptionally modest 0.1-percent speculation tax. That opposition is coming from the United States and Canada, in particular. But there will also be pressure for the tax from outside the G-20, as unions from around the world rally at Cannes to agitate for the proposal.

Arguing that “Wall Street and Big Banks must pay their share for our economic recovery,” NPA says that a financial speculation tax “would tax short term and often speculative activity—the sort of thing that helped create the crisis—and generate billions of dollars of revenue. For ordinary investors, the cost would barely be noticeable, but for Wall Street traders’ activities, it is estimated that such a tax could generate up to $150 billion a year.”

US unions, especially National Nurses United (NNU), are in the thick of the initiative. NNU has been working closely with international unions to encourage global campaigning on behalf of the tax. But it is also working domestically to promote a US version

On Thursday, Congressman Peter DeFazio, D-Oregon, and US Senator Tom Harkin, D-Iowa, both long-time supporters of taxes on speculators, will introduce legislation that would impose a modest tax—less than the 0.1-percent tax proposed in Europe—on financial transactions. The Harkin-DeFazio proposal, though small in scope and narrowly focused on specific types of transactions, would raise tens of billions of dollars that could be used to address budget shortfalls and domestic needs.

The Harkin-DeFazio plan would, as well, place a bit of the tax burden on those most able to pay.

“This is an absolutely essential step to address the 99 percent problem,” said Damon Silvers, director of policy at the AFL-CIO, referring to the Occupy Wall Street claim that the movement represents the 99 percent of Americans whose economic prospects are limited by the 1 percent who control most of the nation’s wealth.

“The financial sector in the United States and worldwide is profoundly undertaxed,” Silvers said. “Inherently, any tax on the financial system is a progressive tax.”

The linkage between the Occupy Wall Street agitation and the push for a financial transactions tax is being made by several groups that were early and enthusiastic supporters of the protest movement.

National Nurses United, which has launched a “Tax Wall Street” campaign, will rally on the doorstep of the US Treasury Department November 3, calling on Treasury Secretary Timothy Geithner and the Obama administration “to end lobbying efforts at home and abroad against a Wall Street tax.”

“It is long past time for Secretary Geithner and President Obama to get on board with other world leaders in supporting this common sense approach to raise badly needed revenues to help fund the critical programs we need to revive the US and other global economies,” says NNU executive director RoseAnn DeMoro.

Along with the NNU; the AFL-CIO; the Service Employees union; the Amertican Federation of State, County and Municipal Employees; the National Education Association; Demos; Rebuild the Dream; National Peoples Action; and Americans for Financial Reform are signing on with BanksterUSA’s petition to members of Congress with a simple message:

The deficit issue that we face today was in large part created by the world financial crisis, a crisis caused by Wall Street speculation. Now it’s time to call upon Wall Street to start paying its fair share to help us out of the hole they dug.

A small tax on financial market transactions has the potential to raise significant revenue and simultaneously limit reckless short-term speculation that can threaten financial stability. We are writing to ask you to support such a tax, and to request that it be part of any new budget plan.

Financial transaction taxes have a long track record both in the United States and globally. The United States had a transfer tax from 1914 to 1966. The UK levies a transaction tax on stock transfers and has done so for many years. The European Union is on the verge of approving a small transaction tax, including ten cents per $100 on stock transactions. The tiny transaction tax they are working on is estimated to raise over $70 billion annually. A similar transaction tax in the United States would raise even more money, as our financial markets are larger.

We join over 1,000 economists who recently signed an open letter advocating a financial speculation tax as “tethnically feasible” and “morally right.”

Technically feasible.

Morally right.

And necessary if we are ever going to get serious about raising the revenues that are needed—from the people who need to pay.